Wednesday, November 4, 2009

Bill On Home Tax Credit Near!

The Senate and House are poised to agree on a compromise measure to extend unemployment benefits that also would expand a popular $8,000 tax credit for home buyers, despite a recent government report on extensive mistakes and suspected fraud in the program.

The Senate might pass its version as early as today, and aides to congressional leaders say the House could accept it this week, sending the bill to President Obama to sign into law. After weeks of partisan delay in the Senate, Democrats are eager to show progress before Friday, when the October jobless report is again expected to show high unemployment.

The home buyers’ credit - enacted last year, expanded this year, and scheduled to expire Nov. 30 - would be extended to cover homes under contract by April 30. Also, it no longer would be limited to first-time buyers of a primary residence, and the income limits for eligible taxpayers would be raised, making many more people eligible.
 Extending and expanding the credit would cost an estimated $11 billion, on top of the $10 billion spent so far. It would be a big victory for the housing and real estate lobby and for the Senate majority leader, Harry Reid, a Nevada Democrat, who faces a tough reelection race next year in the state with the most claims for the credit per capita.

Critics complain that most of the credits go to taxpayers who would have bought their homes anyway, which even the industry acknowledges.

Also, a congressional subcommittee released a Treasury Department report last month about suspected criminal and civil abuses of the program.

Government officials testified, however, that many of the problems may be due to confusion among taxpayers and the IRS about the overlapping 2008 and 2009 versions of the tax credit. With Congress likely to change the eligibility provision again, the new measure could present further administrative problems for the IRS, although the measure does include several new safeguards.

“It’s not unreasonable to think that this is going to provide some further challenges for them, both in terms of implementing a third version of it and in terms of ensuring taxpayers’ compliance,’’ said James R. White, director of tax issues for the Government Accountability Office.

The Treasury Department report said that as of Sept. 30, the IRS had identified 167 suspected criminal schemes and was examining nearly 107,000 cases of potential civil violations.

Under the new legislation, individuals with income up to $125,000 a year and couples earning up to $225,000 would be eligible.

The expanded tax credit was attached to a bill intended to extend unemployment compensation for up to 20 weeks for people who have been out of work for long periods.

Reprinted from Boston Globe November 4, 2009

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